Press Release No. 11/1

Press Release: IMF Completes Sixth Review Under Stand-By Arrangement with Romania and Approves €904.8 Million Disbursement

January 7, 2011

The Executive Board of the International Monetary Fund (IMF) today completed the sixth review of Romania’s economic performance under a program supported by a 24-month Stand-By Arrangement (SBA). The completion of the review enables the immediate disbursement of SDR 769 million (about €904.8 million or US$1.17 billion), bringing total disbursements under the program to SDR 10.569 billion (about €12.44 billion or US$16.12 billion).

In completing the review, the Executive Board also approved Romania’s requests for a waiver of nonobservance of the end-December 2010 performance criterion on general government domestic arrears and for a waiver of applicability of the end-December 2010 performance criteria on the general government overall balance, the general government guarantees and for the target on inflation at end-December 2010.

The SBA was approved on May 4, 2009 (Press Release No 09/148) in the amount of SDR  11.443 billion (about €13.46 billion or US$17.45 billion). The arrangement entails exceptional access to IMF resources, amounting to 1,111 percent of Romania’s quota.

Following the Executive Board's discussion on Romania, Mr. John Lipsky, First Deputy Managing Director and Acting Chair, stated:

“Policy implementation under the Fund-supported arrangement has remained strong. However, progress on the elimination of domestic arrears has been slower than envisaged. The authorities have taken important structural measures, including pension and public wage reforms and the passage of a prudent 2011 budget.

“Romania is now on a clear path to meeting its short and medium-term fiscal goals. The current challenge is to fully implement the approved reforms and maintain tight control over expenditures to assure that the budget parameters are observed. In this respect, further efforts are crucial in the health care sector and in public enterprises to control spending pressures. Improving absorption of European Union structural funds should become a top government priority. Efforts to improve tax administration should continue. The initiation of labor and social safety net reforms will also help boost productivity and target limited budgetary resources to the most vulnerable. Priority should be given to permanently resolving the issue of domestic arrears by way of improving payment discipline in the economy and increasing the credibility of the authorities’ adjustment efforts.

“The authorities’ monetary and financial sector policies have been appropriately prudent and proactive, helping preserve financial stability in the face of the global financial crisis. The jump in inflation due to the recent value added tax increase is temporary, but continued caution is nevertheless needed in gauging the timing and remaining room for further monetary easing. The banking system remains liquid and well-capitalized, but continued vigilance in financial sector supervision is crucial to assure financial sector resilience against increasing non-performing loans and the unsettled regional situation.”